As Tim Minahan pointed out last week, the history of US government procurement is riddled with biting rhetoric about cutting “fraud and waste” from government purchasing. But as we’ve seen time and again, one politician’s glaring example of “pork” is another elected official bringing home the bacon (and helping their chances at re-election). So valiant efforts are often met with fierce resistance and budgets survive the knife…and often increase over time despite questionable ROI.

That’s why it was refreshing to see Defense Secretary Robert Gates’ budget address and subsequent interviews this week. For those who haven’t been closely following, Secretary Gates essentially proposed gutting defense projects that are of questionable military value, opting instead to recognize “the enduring requirement for the capabilities to fight these irregular or hybrid conflicts.” In other words, they are preparing for the more modern, urban conflicts of the present and future, rather than the traditional warfare of the past. And in a more fundamental shift, the Pentagon is proposing going with less expensive versions of some projects - like increasing orders of the F-35 rather than the F-22, even though the F-35 lacks some of the functionality of the F-22. Gates is acknowledging that there is a limit to spending and that priorities must be realigned.

So, what’s different this time around? And can we really expect Secretary Gates to make good on his proposals?

There are two differences, which all of us in the spend management world know quite well, that could help Secretary Gates:

1. Subject Matter Expertise - Secretary Gates began discussing these procurement changes years ago, under his previous boss’ tenure. But at that time, he had pressing military priorities and the spirit of spend management had yet to sweep through Washington. So, now that he’s had time to build relationships in the military and get his head around the programs that do and don’t work, he’s equipped to credibly and wisely propose a realignment. He knows what he’s talking about. It reminds me of Larry Welch’s point #2 on his list of 7 habits of highly effective CPOs - “know the business and the numbers”. I’m sure we’ve all seen how speaking the jargon and knowing the business case makes a difference when trying to expand spend under management in our own organizations. Secretary Gates is essentially applying the same principal in the Pentagon.
2. Focusing on Results - Like many effective procurement organizations (particularly innovators like Tata Motors), Gates is focusing on results and accountability. In an effort to gain better visibility and control over the procurement operations, the Pentagon is phasing out their contractors and bringing those roles back in-house. And on the “product” side, their willingness to either cut or modify underperforming programs likely looks familiar to many of us with budgets to balance. As Secretary Gates puts it, “every defense dollar spent to over-insure against a remote or diminishing risk - or, in effect, to “run up the score” in a capability where the United States is already dominant - is a dollar not available to take care of our people, reset the force, win the wars we are in, and improve capabilities in areas where we are underinvested and potentially vulnerable. That is a risk I will not take.”

The unknown at this point is just how much political will Congress has for these proposed “realignments”. In an interview with PBS NewsHour’s Judy Woodruff, Gates was asked about the impact his proposed moves could have on an already weak employment market. He didn’t sugar coat the impacts in his response:

“To be perfectly honest, there isn’t a single defense program anywhere, procurement program, that doesn’t have an impact in somebody’s hometown or state.” “If you’re going to have any selectivity in what you fund and don’t fund, it will have an impact somewhere.”

So, it remains to be seen how this will play out. But, the gravity of the recession and Secretary Gates’ adherance to spend management best practices bodes well for a military budget with an improved ROI.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.